China's efforts to rein in its high-flying economy could slow Asia's economic growth momentum, but fears they would spark another Asian financial crisis or a recession are unfounded, economists said.
The South Korean government on Friday convened an emergency meeting of officials and experts to analyze the impact of China's plans, but financial war rooms in the rest of the region were otherwise calm.
Economists ruled out a crash-landing for the economy this year and described a plunge in regional stock markets as an over-reaction to Premier Wen Jiabao's (
Chinese authorities have already instructed banks to curb lending as part of a string of measures to calm soaring investment by local governments, which is contributing to the over-heating and over-investment in some economic sectors.
And in its latest move, China's Cabinet, the State Council, ordered a halt to approvals for new steel, aluminum and cement projects this year in a bid to end "haphazard" and "redundant" investments.
The council also called for a review of ongoing investment projects, including commercial offices, golf courses and shopping malls, and wants an end to the process of converting farmland for use in infrastructure projects.
"This will mostly affect sectors which supply construction materials like steel to China because the target really is the overheating real estate market which is related to the construction boom," said Julius Caesar Parrenas, senior advisor at the Taiwan Institute of Economic Research.
Parrenas said he did not think the Chinese economy was in for a hard landing -- defined as a drastic slowdown of economic growth to about 5 percent and lower from near 10 percent.
He also doubted the current measures would lead to a recession or another financial crisis in Asia, which has seen China as a growing export market.
"I think the impact on most Asian countries would be rather limited," Parrenas said from Taipei, adding economies with bigger exposure to China such as Taiwan and South Korea would be affected more.
His comments reflected the World Bank's assessment, which said in its latest report on East Asia last month that China's economy was headed for a "soft landing" with GDP forecast to grow at 7.7 percent this year.
Singapore-based regional economists Nizam Idris of research house IDEAglobal and Song Seng Wun of G.K. Goh brokerage agreed a drastic cooling down was remote at this point.
"My view is that the Chinese authorities are pragmatic with their decision-making process and I will still give a very low probability to a crash landing in the economy," Nizam said.
Any slowdown, however, will impact the region "because China is already part of the Asian manufacturing chain and if that chain is broken by one link it will affect Asia definitely," Nizam said.
Song said the most likely impact of a Chinese economic slowdown will be a slower pace of growth for the region's export-driven economies as China's import appetite wanes.
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